Why CPA Is the Most Important Metric with Leads

Fran Majidi
July 2, 2020
Why CPA Is the Most Important Metric with Leads

When you buy leads, the most important thing to remember is that your CPA is the most important metric because it determines whether or not your investment is worth the cost. The cost of buying leads isn’t important. What’s important is how much money you’re making at the end of the day minus the cost of the leads. What are you willing to spend to make a commission and another at renewal? This is your CPA.



The Alternative to Buying Leads

If you’re saving money by not buying leads but have no new business prospects, that’s bad news. Far too often, insurance agents are hesitant to invest in leads because they are not cheap to buy, at least not if you’re buying from a reputable insurtech company. In fact, buying leads needs to take up a considerable portion of your budget for you to see results.

It’s important also to consider that in this economy buying leads may prove to be the most cost effective way of seeing significant profits. Each agent is different and each one will get different results from buying leads. Let’s look at how we determine your CPA to see if buying leads and live-transfers makes sense for you.

What Is a CPA?

CPA stands for “cost per acquisition.” It is the true way to measure the effectiveness of a marketing campaign, any marketing campaign, whether it’s your own blogging, the postcards you mail out or the leads you buy. Each campaign will have a different CPA. You just need to figure out how much money each campaign brings in and what you spend to get that new business. It’s the only way to find out which approach works best for you.

Ask Important Questions

Pull up an Excel spreadsheet and start plotting down your information. You’ll need to know how you get people on the phone or to your website. Commonly tracked are the CPA for the following types of campaigns:

  • Pay-per-click Advertising
  • Native Advertising
  • Affiliate
  • Leads
  • Direct Mail
  • Display Advertising
  • Social Media
  • Content Marketing

Next, you’ll want to go over how much you spend month-over-month and how many clients each campaign brings in each month. It may not be as easy to pull up these kinds of numbers, especially if you haven’t been asking callers how they found you and tracking those numbers. Or maybe you only have a vague idea of what’s working but you don’t know if you’re overspending to get those clients.

It’s time to start tracking!

Once you begin making it a habit to track exact numbers, you’ll be able to use metrics to see which type of campaigns are most beneficial to you. You can then trim the fat by cutting programs that don’t work and placing more money in areas that do work for your agency.

What’s great about buying leads is that they are very easy to track. You’ll know exactly how much money you’re spending each month and how money you’re making because of that investment. Your ROI will be transparent and so will your CPA. You’ll see exactly what it cost you to buy a certain number of leads to write one policy. You may be surprised to find that it competes well with the high cost of paper and postage you may be spending on direct mail.

What would you rather be, on the phone with new clients or in the pile of junk mail?

Help Finding Your Right CPA

Other considerations may include exposure. Sometimes, you’ll want to sacrifice your profit margins to get exposure to a new territory. Even if you’re not selling policies, you can plant seeds in areas you may not have otherwise explored, perhaps even gain some referrals.

With leads, this is easy to do, by simply adding new area codes to your filters. Ideally, you have multiple state licenses or are considering getting an insurance license in multiple states. It really does help overall growth, and again, leads are perfect for getting business in another state, now that everyone conducts business virtually.

Here's a quick video with our SmartFinancial Director of Account Management that will help you determine your CPA.

Look at Your Ad Spend

What is your CPA on those? You may be spending a lot of money with search terms that are limited in what they yield. Look closely at your metrics to see how many clicks actually convert. Also, you may be getting calls and queries with your PPC campaign but how many policies are you selling to these people? Also, should you shed some of the least effective ads?

The numbers won’t lie. See which is higher, your cost-per-bind from SmartFinancial leads or your ad campaigns and create your budget based on hard numbers, not just what you think you’re supposed to do. Your bottom line determines everything, and if you figure out how to optimize all the different strategies at hand, your agency will see significant growth.

Ways to Track Your CPA

Add UTM Parameters: UTM parameters are tags you add to a URL. When someone clicks the link, the tags are sent back to Google Analytics and tracked. You can use these on social media campaigns and affiliate campaigns. See which ones are stacking up and which ones are flopping.

Get a Proper CMS: There’s no set number of leads that determines whether or not you need a content management system (CMS). Many agents already have one because it makes life so much simpler when it comes to staying on top of where they are along the sales funnel with so many different clients. This is also where you need to get everyone on your team to write down where the lead came from so you can better track your spend and your CPA.

As you increase the number of leads you have to juggle, SmartFinancial strongly recommends a content management system or even a web-based tool that takes leads, organizes them in a readable way and updates you when you need to call or email a prospect. And remember, you still need to follow up with customers to whom you’ve sold policies as well. The right tool will also help you automate emails for birthdays, holidays, and whatever messages you want to automate.

Some content management providers you’ll want to consider include AgencyIQ, ALISS, EZLynx, Vertafore, Typhoon, Mojo, InsiderSales.com, Prospector+, Leads360 or Imprezzio. Be sure to look deeply into your options because one type of management system will be better suited to your agency than another. No two agencies are the same.

Your Account Manager Will Help and Advise

You can talk about your concerns about your CPA with your Account Manager at SmartFinancial, where all of our employees understand what it means for your business to succeed using our leads. Together with your Account Manager, you can begin tracking your CPA each month. Over time, you will hopefully see a rise in the number of policies you write.

Your Account Manager will also offer you different tricks and tips that have worked with other agents. Even though this is largely a numbers game, we are here to help customize a plan that works for you month-over-month and hopefully year-after-year!